1996-01-12 04:00:00 PDT Los Angeles -- Reviewing a case that pits civil rights against religious freedoms, the state Supreme Court considered Wednesday whether a Chico landlady can refuse to rent to an unmarried couple for religious reasons.

The case could affect single renters throughout the state and has drawn national attention from conservative religious groups as well as from fair housing organizations and gay rights advocates.

In the case under review, Johnston said, the landlord "is not carrying out any religious convictions whatsoever; she's doing it (renting her property) for money."

In defense of the landlord, Evelyn Smith, Virginia attorney Jordan Lorence told the justices that his client should be allowed to exercise her religious beliefs and not be subject to "financial coercion by the government."

The case arose in 1987, when Gail Randall and Kenneth Phillips put down a deposit on one of four units owned by Smith in a quiet residential area of Chico.

They told her they were married, but just before they moved in they admitted that they were not. Smith promptly canceled the rental agreement and returned their deposit.

Randall and Phillips filed a claim with the Fair Employment and Housing Commission, charging that they were being discriminated against. The state's civil rights agency agreed and ordered Smith to rent to unmarried couples.

A state appeals court in Sacramento reversed that decision, finding that Smith was protected by her religious rights.

During Wednesday's hearing, the justices gave few clues on whether they would grant Smith an exemption from state laws forbidding discrimination based on marital status because she said she considers sex outside of marriage a sin.

David Link, the lawyer for Randall, argued that renting of apartments should not be considered the exercise of any religious beliefs. Here, he said, "all we have is secular conduct that is motivated by religious. That does not sweep it into the First Amendment."

Thomas Coleman, Phillips' attorney, cautioned that a ruling in Smith's favor would allow landlords the freedom to discriminate based on other acts that they consider to be sinful.

In defense of his client, Lorence said that his client did not discriminate against unmarried couples, only against those who engaged in sex outside of marriage.

During her 25 years as a landlord, Smith has rented to elderly widows and to a mother and her son, Lorence said.

But a few of the justices were skeptical of how Smith would determine who was committing what she considered a sin.

"What about a single woman?" asked Justice Kathryn Werdegar. How does Smith know whether that renter is having sex outside of marriage, the justice asked Lorence, adding, "How about two men?"

Justice Armand Arabian accused Smith of "driving a stake between unsuspecting parties," by denying them rent based on this criterion. Food and housing are two essential parts of life, he said. If the court ruled in favor of Smith, "would we be allowing discrimination to take ripe growth?"

Lorence responded that an exemption for Smith would not prompt huge numbers of landlords with pent-up religious beliefs to impose similar restrictions on potential renters. "We're talking about a tiny minority of people," he said.

Smith, who was seated in the audience of the packed courtroom, said following the hearing that she was pleased with the line of questioning.

"I'm a religious landlady," she said. "I don't think I should be taken out of the rental business because I have religious beliefs."